Six days after the $223 million hack of the DEX Cetus, the Sui community approved with 52.9% of the votes the release of $162 million frozen by the validators. This governance decision provides full compensation for the victims.
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Sui validators vote to reimburse Cetus victims
May 22nd, Cetus Protocol the main decentralized exchange (DEX) in the ecosystem Sui, suffered a piracy that drained $223 million in crypto. The attack exploited the flaw in the checked_shlw function of the smart contract library, using sophisticated manipulation techniques.
The attacker deployed “spoof tokens” with no market value, taking advantage of flaws in the code to alter the protocol’s pricing calculations. This manipulation of the pricing curves enabled the attackers to withdraw real assets from the liquidity pools, including 11 million dollars from the SUI/USDC pool.
The response from the Sui ecosystem was swift. Within hours of the attack, Sui validators identified the addresses containing the stolen funds and froze 162 million dollars, suspending all transactions originating from these addresses.
The impact on the ecosystem was significant. Several cryptos based on Sui recorded significant declines, Lofi falling by 76% and Hippo of 81%. The stablecoin USDC on Sui also fell, temporarily losing its dollar peg.
Following this crisis, Cetus initiated a community governance procedure on May 27 to release the frozen funds. The consultation, scheduled to run until June 3, has quickly reached a conclusion with 52.9% of validators approving the restitution.
A dual strategy for compensating victims
The governance system Sui gives decision-making power to the 114 validators of the network, each with a voting weight proportional to its stake. In this procedure, the Sui chose to remain neutral, refraining from using his influence to steer the outcome.
The approved recovery plan articulates two complementary financing mechanisms. The Foundation Sui grants an emergency loan targeting the $61 million the pirates transferred to Ethereum. At the same time, the $162 million frozen by the validators will be released and channeled into a secure multi-sig wallet. This dual approach ensures full restitution to the victims.
The Cetus incident reveals the persistent vulnerabilities of the DeFi ecosystem. This crisis should serve as a wake-up call to crypto holders on the importance of diversifying their security strategies. Although the measures taken by Sui are remarkable, the use of a hardware wallet such as D’CENT Wallet remains an essential independent security solution.
As a journalist at Coinpri, I’ve been captivated by the world of bitcoin and blockchain since 2020. The decentralized aspect of Bitcoin particularly piqued my interest. Since then, I’ve been working constantly to spread my knowledge, hoping one day to see a world where everyone fully enjoys their financial freedom.
